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Shareholders Plan to Get Tough on Boards Adopting Troublesome Access Provisions

Survey results just released from ISS’s 2015-2016 global voting policy survey indicate that investors are prepared to vote against directors at companies that ignore shareholders wishes and adopt proxy access mechanisms with overly burdensome ownership requirements.

Of the investor respondents, an overwhelming majority said ISS should issue negative director recommendations if a shareholder proposal to provide proxy access receives majority support and a board adopts proxy access with material restrictions not contained in the shareholder proposal. Specifically, 90 percent said an against or withhold vote in a director election would be warranted if a provision had an ownership threshold in excess of 5 percent or an ownership duration in excess of three years. The survey, which received 421 responses from a combination of institutional investors, corporations, advisers and other corporate governance stakeholders, is used by ISS to formulate its voting policies for the upcoming proxy season.

CII is tracking exactly what types of access provisions companies are adopting with the help of data compiled for the Council by the law firm of Covington & Burling. It shows that of one-third of the U.S. companies that have adopted proxy access by private ordering have opted for a 5 percent ownership threshold--statistics that could translate into votes against directors at these firms in the 2016 proxy season.

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